Matthew Oulton, Secretary of the UK’s Young Fabians Economy and Finance Network, economics student and young Labour activist from the Wirral, joins IF’s Worldwide Blog Week to discuss, from a left perspective, how to achieve intergenerational fairness post COVID-19
After a year of locking up the young largely to save the old, it’s hard to discuss the pandemic without mentioning intergenerational fairness. Where for the elderly, disruption to their lives, isolation from their families, and the threat of severe illness or death have been pervasive for months, for the young an ominous recession is the greatest threat.
The intergenerational effects of the recovery, therefore, are of paramount importance. After the previous economic crisis, the Conservatives were clear in their ethical argument – we could not pass on debt to future generations. Austerity was presented as a moral imperative, in part, because the economic case was exceptionally flimsy.
Austerity was a disaster for all the most vulnerable in our society, young and old. The pandemic – with its threat of severe illness and death for older people – has the propensity to be the same. However, austerity also undeniably entrenched intergenerational injustice. Because pensions were not cut (in fact, through the triple lock, pensions spending rose as a proportion of GDP during austerity) and health spending was frozen, working age and younger people bore the brunt of spending cuts.
Furthermore, whilst the fiscal deficit did decline under austerity, the recovery was slow and painful, particularly for young people. Real wages had barely returned to their pre-crisis levels when we were struck by this recession. The Current Account, meanwhile, which provides an understanding of the change in total debt from a nation to foreign debtors or creditors (a better measure of how much debt is being passed on to future UK generations, incidentally) continued to be very large and very negative.
A decades-long climb in house prices far above wage growth has also been a key driver of intergenerational inequity. Those who have owned property for a long time have seen record real increases in house prices and associated rental incomes.
These are paid by young people, both through their rent and when they try to purchase property of their own.
Education and work
To exacerbate matters, whilst the health effects of COVID-19 are usually substantially lower on young people, the impact on our education and work has been profound. The most affected industries, including retail and hospitality, have very young workforces. Schooling, meanwhile, has been entirely disrupted for many children. Whilst some students could access online teaching, many schools and families lacked the financial and technological resources for this to be viable.
Even where it was possible, quality was likely compromised. The government’s plans for additional education have been meagre, seeking to solve a system-wide catastrophe affecting every child with focussed tutoring for a minority.
Catch-up teaching essential
To prevent future damage for a generation, the government needs to provide catch-up teaching for every child in the nation. The cost will be exorbitant and the logistical challenge daunting, but to fail to do this would be to allow a cohort of children to have their economic output permanently cut.
Social care presents another looming crisis with potential intergenerational impacts. The current system has been exposed as evidently not fit for purpose by the pandemic, but any remedy will clearly involve more spending. The damage of our inadequate social care system is not confined to the elderly – many working age people financially support their older relatives, and almost everyone has a loved one who may eventually need care – but the burden is borne mostly by middle- and lower-income older people.
Put simply, people should not be faced with potentially infinite bills if they need social care, so we need a new model. Personally, I would favour an NHS-style system: however, other satisfactory systems, involving private provision or underwritten insurance are also viable. A move towards any of these alternatives will be expensive, though, and the young alone cannot be expected to pay all the costs of it.
So, how do we pay for it?
Firstly, the triple lock of pensions needs to go. It is a pledge based only on political expedience, with no economic justification. An inflation-linked assurance would be easier to plan for, to understand, and to finance.
Secondly, we need to modify our tax settlement to reflect the need for intergenerational fairness. We should be prepared to tax the asset-rich more heavily, either through higher capital gains taxation or a wealth tax. Such a shift would see the enormous boon afforded to property owners during the past few decades being shared more widely across the economy.
Finally, our attitude to investment needs to be broader. We should not be afraid to pass on debt to future generations, when that debt is accompanied by appreciating assets. Passing on a house and mortgage to your child, after all, is rarely a burden. Tangible assets, such as road and rail, are obvious examples of this, but the same can also be said for education, health, and their associated infrastructure.
A population with inadequate health or education will be less able to pay off financial obligations, representing a sort of intangible “shadow debt”. This is how we should evaluate the economic settlement we are passing to our children.
By taking this broader view of our obligations to future generations and being unafraid to properly finance the recovery, the 2020s need not be a repeat of the 2010s. Sluggish growth, stagnant wages, and crippled public services can be avoided. All it will take is political leadership, optimism, and willpower.
The Young Fabians does not take organisational positions on policy issues. Matthew’s views are therefore not the official position of the Young Fabians, but are presented as a contribution to the debates surrounding intergenerational fairness. If you’re under 31 and on the left, you can find out more about the Young Fabians here and join us here.
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